The SALT Group | Iowa – Sales Tax – Iowa enacts sales tax exemption for supplies used in manufacturing.
Iowa – Sales Tax – Iowa enacts sales tax exemption for supplies used in manufacturing.
On March 22, 2016, Iowa Gov. Terry Branstad signed into law HF2433, which exempts supplies used directly and primarily in manufacturing and research and development from the state's sales and use tax. Additionally, the law provides specific definitions for manufacturing 'supplies' and 'replacement parts' for sales and use tax exemption purposes. Lastly, the law rescinds many of the Iowa Department of Revenue's amendments to its Administrative Rules relating to manufacturing machinery and equipment that were published on Jan. 6, 2016.
The provisions of HF2433 became effective on March 22, 2016, and should ease the compliance burden on taxpayers who were previously required to distinguish between a taxable supply and exempt replacement part, which, based on prior law, was very difficult. Taxpayers engaged in manufacturing or research and development should review the changes provided under HF2433, and consider their impact when making sales and use tax exemption decisions.
Iowa Publications – House File 2433 – Enrolled.